Bitcoin’s Coming Split: What You Need to Know
Bitcoin has faced turmoil in the past but nothing like this. In two weeks, a massive fight taking place among bitcoin insiders could produce a ruinous schism—undermining the integrity of digital currency and threatening its sky-high value.
The fight is over a so-called fork in bitcoin’s software, known as SegWit2x, that will create two competing versions of the currency and lead to disagreement over the “real” bitcoin. There’s even a battle over who gets to use the popular BTC ticker symbol.
The fork will also mean a payout to existing bitcoin holders, though any windfall could be overshadowed by larger turmoil. To understand what’s at stake, here’s a plain English Q&A to explain the controversy.
Why is bitcoin going to split?
There is a disagreement between key stakeholders over how to update the core software that runs bitcoin. You can learn more about the technical details below, but the crux of the fight is over whether to double the size of bitcoin blocks.
The blocks, which are added every 10 minutes, serve as a record of all bitcoin transactions to create a permanent blockchain ledger. The current controversy means there is likely to be two bitcoin blockchains—one that uses smaller 1MB blocks and one that uses bigger 2MB blocks—and temporary uncertainty over which is the “real” bitcoin.
While bitcoin has experienced these sort of forks in the past (most notably with the creation this summer of rival currency “Bitcoin Cash,”) the market has never regarded such splits as a replacement for the original bitcoin. This time could be different.
When will the fork happen?
It is supposed to take place soon. This website offers a more precise moment —specifically Nov. 16 at 5:42 am—based on the number of blocks being added to the bitcoin blockchain. The fork is supposed to go into effect for block number 494784. (Once again, technical details on blocks and forks are further below).
Who is supporting the split?
The main advocates for the bigger blocks, aka B2X, are consortiums of bitcoin miners who use specialized computer rigs to compile transactions on the blockchain—and earn bitcoins (currently valued at around $7,400) while doing so. They argue the bigger blocks are needed to accommodate the rapid growth of the bitcoin network, and to reduce the rising transaction fees that have come with this growth.
The mining consortiums are being backed by many of the companies that provide the financial eco-system that supports bitcoin. These include certain exchanges, wallet providers, market makers, and storage vaults. The positions of these companies, however, is inclined to shift based on the market and popular sentiment.